You don't have to live in America to have a US tax problem. Billing US clients, holding US stocks, receiving RSUs from a US employer, or running a US LLC each brings its own set of forms — and the Indian return has to line up with all of them.
If you invoice US clients
The default is that a US payer withholds 30% on certain payments to a foreign person. The fix is paperwork, filed before payment:
- Form W-8BEN (individual) or W-8BEN-E (company) tells the payer you're an Indian tax resident and claims the treaty rate.
- You'll need a tax residency certificate from the Indian tax department and, for companies, usually a US tax identification number.
- Ordinary business income for services performed in India, with no US presence, generally isn't US-taxable at all under the treaty — but only if the payer has your W-8 on file. Without it, the 30% goes to the IRS and you're left chasing a refund.
If you hold US stocks or RSUs
- Dividends from US shares are taxed in the US at the treaty rate (typically 25% for Indian residents, and the broker applies it once your W-8BEN is on file). You then report the gross dividend in India and claim credit for the US tax.
- Capital gains on US shares are generally taxable in India, not the US.
- RSUs and ESOPs from a US employer are taxed as salary in India when they vest, and again as capital gains when you sell — two separate events that get missed routinely.
- Schedule FA in your Indian return must list every foreign holding: shares, the brokerage account, and any foreign bank account. This is a disclosure requirement, independent of whether you made any profit, and the Black Money Act penalty for omission is ₹10 lakh.
Your Indian AIS now carries far more foreign-remittance data than it used to. If you remitted money abroad under LRS and your return says nothing about a foreign asset, that gap is visible.
Claiming credit for US tax: Form 67
Where the same income is taxed in both countries, the India-US treaty gives you a credit for the US tax against your Indian tax. To claim it you must file Form 67 with the details of the foreign income and tax paid, along with evidence such as the Form 1042-S or broker tax statement. Miss the form and the credit can be denied even though the tax was genuinely paid.
If you run a US LLC or C-Corp
Then you're in the entity world too — Form 5472 with a pro-forma 1120 for a foreign-owned LLC, or a full 1120 for a corporation, plus state filings. We cover that in our note on registering a US company from India.
How Vitt-Marg helps
We work the Indian side: getting the residency certificate and W-8 documentation right so withholding doesn't happen in the first place, reporting foreign income and assets correctly in your ITR, filing Form 67 for the credit, and fixing years where Schedule FA was left blank. For US returns themselves we work alongside US preparers, so nothing is claimed on one side that contradicts the other. See also our ITR filing service.
General information, current as of September 2026, not advice for a specific case. GST and income-tax rules change often — check with us before acting on it.